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Tyson CEO expects soaring meat prices, record profits

Submitted by The City Wire Staff on Wed, 03/12/2014 - 5:30pm

Tyson Foods CEO Donnie Smith took a seat on CNBC’s “Closing Bell” segment Wednesday (March 12) to discuss food inflation and any potential impact on the meat giant’s profits going forward. Company executives were in New York for the 18th Annual Goldman Sachs Agribusiness Conference.

Smith said he expects another record year for meat prices, and for Tyson profits as well.

“At the end of 2013 we saw beef cutout at about $2 a pound, it’s up to $2.40 now ... pork prices were about 97 cents a hundredweight, they are $1.17 now. These are significant price increases,” Smith said.

He explained that consumer demand for meat is still very good, which allows Tyson to pass along the higher prices. Smith added that as prices rise, consumers trade down from more expensive cuts toward those with higher value propositions. When fuel prices rise above $3 per gallon, Smith said consumers start trading down.

“Right now we are seeing consumers who might reach for the ground beef chose the chicken instead, because it’s a cheaper protein relatively speaking,” Smith said.

He reiterated that the company continues to shift away from commodity type products toward more value-added meal solutions that resonate with the Millennial generation.

“They are not the core meal preparers that their previous generations were,” Smith said of the Millennials.

He expects Tyson will continue to pass along inflationary costs to the consumers as long as demand allows it.

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During the Goldman Sachs speech, company executives praised the work of Tyson employees who have adopted a “no excuses mindset” that has led to sales and earnings growth through a challenging operational climate in 2013.

Tyson shares rose 73 cents on Wednesday closing at $40.47. The company stock price has ranged from a low $22.47 to a high $40.80 over the past 52 weeks. The Springdale-based meat giant will next report earnings on May 5, analysts expect 62 cents a share. The company executives reiterated guidance between $2.78 and $2.89 per share for the full year. The company does not provide quarterly guidance.